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THE IMPORTANCE OF NEGOTIATION AND SALES TECHNIQUES ON
INSURANCE MARKET
Nicoleta DOSPINESCU
Faculty of Economics and Business Administration
Alexandru Ioan Cuza University
Iasi, Romania
dnicole@uaic.ro
Abstract
Most Romanian economic actors are affected by major changes in macroeconomic policy,
domestic economic and financial crisis and unstable legislative and fiscal framework. In this situation,
the importance of the insurance market should be reconsidered in order to properly manage the
various types of risks. Market development may be key human resources and sales expertise in
negotiations, and reporting to new customer needs.
The purpose of this paper is to know the quality of human resources working specialization Iasi
insurance market. Objectives considered concerns: the testing of skills for implementing strategies to
maintain and develop customer base, identifying strategies and techniques of negotiation and sale of
the guest to remove objections and completing the sale. The expected results could not confirm that
staff is sufficiently trained and that opportunities to increase turnover is lost due to a failure to apply
the best techniques of negotiation and sale.
Keywords: insurance, negotiating strategies, selling techniques, turnover, market development
JEL classification: M31
1. INTRODUCTION
At a time when the Romanian economy is keen to decrease when natural disasters af-
fect people and agriculture, the unemployment rate is increasing (6.58%) and inflation
reached 7.8% we wonder if all of these represent for the insurance market an opportunity or
a reason for declining a threat. We prefer to believe that we beginning to learn from mis-
takes and to think that the awareness of the insurance market importance would be an
advantage for our customers, by transferring risk to an entity available to manage it. So, in
the next few months, the loaded periods of negative events may mean opportunities between
the exploited also by insurance companies. To maximize their chances of success, the pro-
fessionalism of their employees must be on the forefront. Insurance agents well trained in
the art of negotiations and sales will be able to attract and / or retain more customers
236 Nicoleta DOSPINESCU
2. THE CURRENT SITUATION OF THE INSURANCE MARKET IN
ROMANIA
Since the first months of 2009, external factors have had an impact on two other new-
generation sources in the insurance business: leasing decreased activity and decreased car
loans granted by banks and real estate. As a result, insurance claim experienced significant
decreases especially for life insurance and the hull because of Casco because of the con-
sumption, expenditure and income restriction. The growth rate of unemployment decreased
appetite generate individuals for insurance.
Current insurance market is also facing other problems. In addition some customers
unable to pay, there was an escalation of the claims ratio, the pressure to reduce costs, but
also the phenomenon terminations felt very strongly compared to previous years. Another
major problem, at present, is fraud. False statements and fabrications are just a few of the
many examples that can be given [Luca Lia, 2010, 258-259].
All these issues require the adoption of policies of prudence in business, cost reduction
and business efficiency. In this context, communication with current and prospective cus-
tomers and sales force appear to be very important elements to increase performance of
insurance. Transparency in dealings with customers, approaching them through various
means of communication, retention policies, products diversification and a professional and
dedicated sales network, are key elements for the dilution of current issues Romanian insur-
ance market.
Sales force which is based the insurance companies: insurance agents, marketing
agents, consultants, insurance inspectors, sales executives, uses communication techniques,
negotiation and special sales, tailored to customers and the field. Most times, the company’s
staff is part of a structure like MLM - Multi Level Marketing and direct selling is prac-
ticed. MLM system, known as “the millennium wave” [http://www.mlmonline.ro/multi-
level-marketing-mlm.html], is a tiered, pyramid schemes, which involves an intense team-
based work which creates interdependencies between "links".
Sales force is regarded as a component of the organization's communication system
due to multiple advantages offered: interactivity vendor-customer relationship and adapt
quickly to the needs of the latter, active participation of the sales force until complete of
sale, assuming the role of consultant sale process.
At present, organizations must give great importance to training, development and im-
provement of the team of insurance agents because through her it can be reached most
important objectives referred to [Richard, 2003, pp.115-118]. These include: increased turn-
over, the effective promotion of new products to market, development strategies capable of
"pushing" product to consumers, building and maintaining a favorable image and organiza-
tion products, creating and maintaining strong and lasting relationships with those
customers interested in various products and services to the insurance company, attracting
potential customers to organization products.
3. STUDY ON PERFORMANCE OF INSURANCE AGENTS FROM IASI
Forms of negotiation and sale charged by insurance agents are varied and multiple.
They are used depending on the circumstances, the personality of the seller, the habit and
the updates available at training courses attended. To determine which is the sales force of
The Importance of Negotiation and Sales Techniques on Insurance Market 237
insurance agents from Iasi and which are the forms of negotiation and sales techniques used,
I have made the following study. The objectives considered were:
O1. knowledge of strategies for maintaining and developing the client portfolio;
O2. identify negotiation strategies most frequently used by insurers from Iasi;
O3. identify negotiation techniques charged by insurers;
O4. determining the selling techniques used by insurers in relation with various clients;
O5. finding the techniques to remove the objections raised by customers;
O6. knowing how insurance agents from Iasi complete the sales;
O7. determine the level of specialization of the agents form Iasi in the negotiation and sale
field.
Based on these objectives, we wanted to test several hypotheses derived from observ-
ing activity in the market of insurance from Iasi, in the idea to learn the truth about them and
to achieve our objectives mentioned. Thus, the assumptions are as follows:
I1: Currently, priority is maintaining the customer portofolio, in comparison with expand
and diversify of it.
I2: insurance agents prefer as type of negotiation strategies: cooperation and compromise.
I3: The tactics used in negotiations are more offensive.
I4: The most common negotiation technique is "Yes, but..."
I5: For sale of the insurance policies is preferred especially "regards technique" and "the
sale in three steps"
I6: The strategy for remove the objections most often used is to avoid them.
I7: On completion of the sale, companies require referrals (recommendations).
I8: Most insurance agents from Iasi market have not studies in communication, negotiation
and sale of insurance, and apply only a limited set of strategies and techniques, intuitively
how.
The study was conducted in January-February 2011, on the Iasi market, that using the
quantitative method based on questionnaire investigation, on a representative sample of 27
insurance agents. They come from five major companies that sharing the insurance market
from Iasi: Astra, Grawe Insurance, Omniasig ING General Insurance. The questionnaire
was constructed of 30 dichotomous items using both closed questions (question 1), or mul-
tiple answer (I.7, 8.19), and open questions, postcodificate (î.29, 30) and semi-open (4, 17,
25). Types of scales used for closed responses was semantic differential, Likert scale, rank-
ing and ordering interval scale type.
4. INTERPRETATION OF THE RESULTS
As a result of the question-filter no.1 concerned to the post which owned in the insur-
ance company and the knowledge of the field sales, 25 respondents have been validated to
continue the investigation and two were rejected because respondents did not meet the nec-
essary condition to be part sample.
238 Nicoleta DOSPINESCU
0
5
10
15
20
25
RejectedValidated
2
25
Respondents validation
Series1
44%
36%
20%
<1 year
1-3 years
> 3 years
0% 10% 20% 30% 40% 50%
Sales experience
<1 year
1-3 years
> 3 years
Figire no. 1 Valid people for the questionnaire Figure no. 2 Sales Experience
Question two about the respondents experience in insurance providing the results
shown in figure no. 2. We can see that 44% of respondents experience is less than 1 year,
36% of them have worked in this area between 1 and 3 years and 20 % over 3 years of expe-
rience. Experience counts, but their training is very important for the performance.
The question three wanted to test the agents concern for maintaining or expanding
portfolio of customers. The result obtained in figure 3 shows that only 32% of respondents
are focused on maintaining customer portfolio, the remaining 68% are concerned about
what it would mean developing a future orientation. The trend of development is manifested
especially agents with less experience in the field, for 1-3 years (67.5%), which they still do
not have a stable portfolio, comprehensive enough.
32%
68%
Maintenance versus development portfolio
Maintenance
Development
12%
32%
4%
44%
8%
The prospecting methods practiced
Internet
Telephone
Post
Recommendations
Presentation Stand
Figure no. 3 The orientation to the maintenance Figure no. 4 Prospected methods
precticed development portfolio
Regarding the variation of potential customers to prospect for market insurance is most
commonly used recommendations method in 44% of cases, because it seems safer, and the
next most popular is telephone prospecting with 32% of. An interesting thing is that Internet
prospect seems to be widespread in Iasi, being chosen in proportion of 12% as they will be
seen in figure 4
The question 5 tested ways of maintaining the current portfolio of customers and the
answers shows that: first place is held by "periodically contacting clients to inform" (20pc),
the second is used "phone curtuazie (8pc) and on the 3rd
place is "loyalty bonuses", "con-
gratulations on your customer " and "wishes for Christmas" (7pc). Given the slightly rigid
The Importance of Negotiation and Sales Techniques on Insurance Market 239
price structure insurance system, the option of granting discounts to loyal customers rarely
used, obtaining a small percentage (4pc).
0 5 10 15 20
Regular contact
Courtesy call
Loyalty bonuses
Holiday greetings
Birthday cards
Discounts
Maintaining portfolio of clients
points
Figure no. 5 Maintaining portfolio of clients
The next question concerns the preference for a particular type of negotiation strategy
often used in the insurance market. Results show that 44% is going on cooperation, 40%
concession strategies and in the proportion of only 12% is going to compromise. The figure
no. 6 is suggestive and detailed.
Negotiating tactics preferred by agents, tested by question 8, showing that the use of
mixed type (offensive-defensive) in 76%. Only 16% of respondents indicated that they are
rather offensive and only 8% are rather defensive. It can be seen in the figure no.7
0%
10%
20%
30%
40%
50%
4%
44%40%
0%
12%
Negotiation strategies
domination
cooperation
concession
avoidance
compromise
16%
8%
76%
Negotiation tactics
offensive
defensive
mixt
Figure no. 6 Negotiation strategies Figure no. 7 Negotiation tactics
Question 9 shows a preference for insurance agents to use some negotiation techniques
learned, or improvise in the moment. The results are interesting especially if we do correla-
tion with experience in the insurance field and specialized trainings attended by staff and
presented the last part of the study.
240 Nicoleta DOSPINESCU
28%
20%
52%
Negotiation techniques
techniques
Improvisation
techniques and improvisation
Figure no. 8 Negotiation techniques
The results to question no.10 on the negotiation techniques Agents agereate shows
92% of them prefer the technique of "Yes, but ...", while 4% disagreed with it. Technique
"contradict client is approved only 16% of the respondents. Technique "statistical poison-
ing" is used 60% of practitioners in insurance sales, and "rumbling mill" is used by 84%
between them. Thus a ranking of preferences on techniques used in negotiation looks like
this: I "Yes, but", II "die croaking", III "poisoning statistics", IV "contradict the client”.
The questions 11 and 12 shows that for winning customer trust, staff use as technique:
“the personalizing speech” în 80% of cases, and în 20% of situation prefer more distant is-
sue. 54% of them are based on a confidence that the customer agrees with him so as to raise
awareness and convince.
Question 14 shows that personal style has a great influence in the choice of negotiating
techniques. Here we can detect a problem serious enough in sales, 68% of agents said they
tend to talk more during the negotiations, and only 32% are more concerned to listen. A
good adage that "silence is golden, and the talk it is silver”, what that would mean listening
to the customer would be an advantage for salesman, because he could shows the details on
its preferences and needs, very helpful in persuading him to buy
Responses to the question "How do you react when a customer pressures, forcing the
note?" brought interesting responses as can be seen in the figure below:
4%
68%
8%
20%
Response to customer pressure
off negotiations
calm
irritation
call to the boss
Figure no. 9 Response to customer pressure
The Importance of Negotiation and Sales Techniques on Insurance Market 241
Another question is testing the sale technique in three steps, and the responses show
that it is applied correctly by 48% of respondents, they recommending first an insurance ex-
pensive an then another one cheap. It goes on the idea of contrast: "white is whiter, near
black", which means "cheap next expensive is cheaper", so undeniable. This technique gives
an expensive insurance possibly the first to sell if it is presented properly, or to make insur-
ance of average value, very attractive. Other respondents tend incorrectly first to
recommend cheap insurance (20%), or average prices (20%) and then the expensive insur-
ances (12%) and they will have very little opportunity to sell in this way.
12%20%
48%
0%20%
Three-step sales technique
the most expensive
the cheapest
the most expensive, then the cheapest
the cheapest, then the most expensive
the average price
Figure no. 10 Three-step sales technique
Compliance with the rules of sale is one of the basic rules in any transaction. Respons-
es to question 17 show that only 48% of the agents first identify customer needs. The
remaining 36% shall, wrong in presenting the product and its benefits, wasting several
chances to capture the customer attention by reporting to his needs.
Series1
0%10%20%30%40%50% 36%
12%
48%
The steps of sales stages
offer presentation
customer personal life
need to purchase
Figure no. 11 The steps of sales stages
The indecision of the customers is treated differently in the sales process. As the fol-
lowing figure presents, the situation of sales agents in this chapter is quite good because
242 Nicoleta DOSPINESCU
resort to any means other than to stop selling the product. This can be seen in the next fig-
ure.
0% 10% 20% 30% 40%
suggestion what to choose
forcing decision
find out the reason of indecision
replay of the presentation
quitting sale
something else
Handling customer indecision
Figure no. 12 Handling customer indecision
Among the techniques to remove the objections, according to the responses obtained,
"dealt with in the timing" is preferred by most respondents (52%), as can be seen from the
chart below.
0% 10% 20% 30% 40% 50% 60%
Avoidance technique
Ignorance technique
Reformulation technique
Delay technique
Denial technique
Solving techinique
Techniques to remove the objections
Figure no. 13 Techniques to remove the objections
In the case of specific objections about the price and necessity, those who sell insur-
ance appeals to interesting solutions. When a customer claim that price too high, 36% of
agents suggest another product, and another 36% want to know the real reason of complaint,
to know whether the complaint is real, or is artificially created; the remaining 20% prefer to
give an unhappy customer bonus price. If the complaint relates to non-need, the sales agents
or waive time (44%), or find out more details about customer choice (44%), more rarely ig-
nored calls (4%), or use the technique “mill croaking"(4%), or quit (4%).
Top ways to complete the sale is as follows:
The Importance of Negotiation and Sales Techniques on Insurance Market 243
-30 -20 -10 0 10 20 30
Protocol relationship
Further down meeting
views on the meeting
request recommendations
handshake
congratulations for your choice
Complete sale
Figure no. 14 Complete sale
Unfortunately, the insurance agents are not concerned with a view to know too much
about the meeting that customers have had. A feed-back could help to improve future sales
and to facilitate the subsequent meetings in order to submit other insurance packages. Very
few of the agents set up a subsequent meeting, and keep the customer relationship rather
protocol.
Among the surveyed, only 24% manage to complete within a month insurance con-
tracts with a value of more than 1,500 RON per month, which means too less and an
inefficiency of application techniques and tactics of negotiation and sales.
20%
28%28%
24%
Average monthly sales
<500 ron
500-1000 ron
1000-1500 ron
>1500 ron
Figure no. 15 Average of monthly sales
This could be explained by the fact that most of the insurance agents have not attended
courses in negotiation and sales, and the few who have followed, have not attended to the
highest level in universities, but the company insurance. The graphs below are enlightening:
244 Nicoleta DOSPINESCU
48%
52%
46% 47% 48% 49% 50% 51% 52% 53%
I took courses
I didn't took courses
Sales courses
44%
56%
0% 10% 20% 30% 40% 50% 60%
I took courses
I didn't took courses
Negotiations courses
Figure no. 16 Sales courses Figure no. 17 Negotiations courses
It can be seen that only 15% of those who have attended special courses went at the
universities or went to training in the field. Most preferred the training made in insurance
companies which often proves insufficient for a tough market.
0%
10%
20%
30%
40%
50%
60%
70%
insurance company
faculty the NGO training company
elsewhere
61%
15%7%
15%7%
Attending at courses in various locations
Figure no. 18 Organizers of courses
The quality of courses and applying techniques and strategies into practice, by refer-
ence to the customer are essential for insurance sales success.
5. CONFIRMATION OF THE HYPOTHESIS
As a result of research carried out we can now analyze the veracity of hypotheses.
Thus we can say that the first case about the conduct of sales agents to maintain customer
base is not confirmed, but only a small degree (42%). This is because 68% of them are mov-
ing towards its development because of various situational reasons.
In the preferred negotiation strategies by insurers and hypothesis 2 is only partially
confirmed because they practice the strategy of cooperation and concessions, in disadvan-
taged of strategy of compromise which was part of the supposition. Their strategies are the
most fair-play in a changing society which is a harsh shift in the economy in recession.
The Importance of Negotiation and Sales Techniques on Insurance Market 245
The results show hypothesis 3 totally rule out, because the tactics used in negotiations
are not totally offensive, but only a very small proportion of 16%. The tactics are mostly
mixed (76%) which creates the possibility of adopting a cooperative strategy recommended
by experts in the negotiations field.
The hypothesis 4 on the most common negotiation technique is confirmed in its entire-
ty as "Yes, but..” is preferred by insurers, followed by technique “mill rumbling" and the
"statistical poisoning”. It should be noted that only 28% of respondents turn to pure tech-
nical, 56% of them combine them with various improvisations. Also, 68% of respondents
indicated that they speak more than listen to customer preferences, or its needs. For the last
reasons the sales performance are weak.
The hypothesis 5 is confirmed partly because it surveyed only 24% use "regard tech-
nique" and prefer rather "sale in three steps” (48%), but it applies largely incorrect. The
incorrect application again brings to the fore the idea of not knowing mechanisms of human
psychology, the relationship between needs-perceptions-solutions and the techiques listed as
such.
The six hypothesis refuted in favor of the insurers. So when there are objections from
the majority of customers prefer to apply the technique of resolution at a rate of 52% instand
of the avoidance techique (12%). They also successfully uses the reformulation technique
(28%) which helps to not lose customers, but to dismantle their objections, eventually end-
ing the contract. If the price objections most often suggests a different product (36%) or
used as an interrogation technique (36%) to determine the source of discontent. If it's com-
plaint about lack of security needs in cheese, most insurers further practical approach (44%)
and interrogation techniques (45%).
Regarding the seven hypothesis we can say that is confirmed in a large proportion, be-
cause the insurance agents require recommendations assurances regarding expand the
customer base. What is the disadvantage of insurers? It comes from the fact that they do not
establish subsequent meetings with clients who have contracted and does not require any
feedback on a meeting, lacking such control is favorable or unfavorable aspects.
Hypothesis eight is confirmed against insurers agencies on the Iasi market because the
answers to questions 29 and 30 shows that only 48% of them graduated in sales and 44%
are specialized in the negotiations. The remaining acts improvising, how intuitive, or "steal-
ing items" from those with experience. Those who have done training or courses have gone
to an extent of 61% only to those held by insurance companies and have attended only a
very small proportion of those held by faculty (15%), or specialized training firms (15%).
For these reasons insurers do not act professionally, uses a limited set of strategies and tech-
niques and lost opportunities. The proof is their low performance on the contract worth
more than 1,500 RON per month. Only 24% of them manage this thing, which is very little
of what could be done.
6. FINAL CONCLUSIONS
Although local insurance companies are struggling with increasing competition from
foreign ones, they have still not invested enough in improving the quality of personnel qual-
ifications and performance regarding to obtain net performance on scientific basis.
Decreased purchasing power of the population and the effective demand for insurers
should be a signal to refocus to keep the customer portfolio and then, to develop it. Another
problem existing in our country is that they lower conviction of the population about the
246 Nicoleta DOSPINESCU
usefulness of insurance, especially in rural areas; even if there happened most cases requir-
ing insurance: flood, fire, etc. In this case, communication and promotion techiques of the
insurance products reported to customer needs can pay off.
Romanian insurance market outlook may be influenced by the selling of future sales
and negotiation professionals, properly trained as to be able to use negotiation and sales
techniques for respecting basic stages of this process which can be completed successfully.
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